Jobless growth plaguing economy
Unemployed workers must enhance skills to match emerging requirements
Much has been written on Pakistan’s economy from the perspective of macroeconomic stability where economic indicators such as gross domestic product (GDP), fiscal deficit, trade and current account deficits and debt consisting of domestic and external components draw the attention of readers.
However, media commentators, economists and policy analysts hardly discuss the phenomenon of jobless growth, which has started to plague the economy since 2000. Jobless growth is an international phenomenon, which started to emerge across the globe in early 2000. Proponents argue that this is the downside of corporate globalisation. Although corporate globalisation started in the late 1980s, this phenomenon got ascendance in early 2000.
Analysts and economists, who studied this phenomenon, stated that corporate globalisation shifted the focus of business firms from the domestic market to the external one. This shift of focus increased the significance of capital and technology. Business firms started to substitute labour for capital and deployed modern technology. The capital-intensive nature of manufacturing and production rendered many workers jobless.
Apart from manufacturing, advanced techniques have been adopted in distribution, which even reduces the significance of low-skilled workers. As a result, there is a steady increase in labour productivity of workers in organised manufacturing and even in distribution. Interestingly, low-paid unskilled workers are taking refuge in the informal sector.
Usually, the developing economies face the problem of informal employment where people end up in low productivity jobs, which do not increase the standard of living of people. Official documents hardly pay attention to the significance of informal sector. There has been growth of the informal sector in the economy since the early 2000s.
This growth in the informal sector affects the psychology of people. A business firm and its managers do not trust government officials and consider them corrupt, while government officials declare private entrepreneurs opportunist.
The lack of trust decreases the productivity of business firms, which is reflected in the aggregate economy. If economists describe the phenomenon of jobless growth, they will argue that the workers who have become jobless will find jobs elsewhere.
They go on to state that capital intensity will increase productive capacity of business firms and those firms will produce more output than before and there is a need that those jobless workers enhance their skills to match the emerging requirements.
Hence, the human capital story gets the front seat. For this to happen, the government should provide re-training facilities to those workers and subsidies to business firms.
On the contrary, the proponents of jobless growth phenomenon pose a question: from where demand comes?
They are of the view that workers create demand and spend what they get. If workers are not in job, they will not have buying and consumption power.
They further state when skills of workers become obsolete, profitable business firms will not hire them. Even those business firms will be reluctant to train them, since they will find less costly workers.
Regardless of the divergent views about this phenomenon, we need to understand that jobless growth is going to stay as this is one of the manifestations of corporate globalisation.
In order to compete in the international market, business firms either adopt cost-cutting measures in the short run or pursue revenue-enhancing strategies in the long run. In order to effectuate these measures, the business firms employ highly skilled workforce while outsourcing peripheral functions.
In a nutshell, Covid-19 has already compelled business firms to look for innovative ways to provide services to their customers. These innovative ways will help the firms to grow by employing a handful people.
Hence, gainful employment will remain a challenge for successive governments in the years to come.
The writer is the Assistant Professor of Economics at SDSB, Lahore University of Management Sciences (LUMS)
Published in The Express Tribune, September 21st, 2020
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